The financial shortfall will also see the number of events held during the lead up to 2008 curtailed.

The council has abandoned plans to expand the celebrations during the Year of the Sea in 2006.

It wanted to hold the Mersey River Festival over five days and increase the size of the Biennial Arts Festival.

The Creative Communities scheme, which supports voluntary organisations across the city, will also be slimmed down.

A spokeswoman for the Millennium Commission insisted Liverpool had done well out of its grant allocation.

She said: "There were 19 urban areas that got money. Liverpool was one of seven that got more than #1m pounds.

"Compared to other places, they therefore did very well.

"There was no reason for getting less. After Capital of Culture, there were all these great ideas for schemes across the country. It was decided there should be something for the whole of the country."